Q2 2023 Telesis Bio Inc Earnings Call
Okay.
Good day, and thank you for standing by welcome to the Q2 2023.
Bio <unk> earnings conference call.
It's time, all participants are in listen only mode. After the speaker's presentation there'll be a question and answer session.
Good question during the session you will need to press star one one on your telephone.
Here, an automated message advising your hand is raised to withdraw your question. Please press star. One again. Please be advised today's conference is being recorded I would now like to turn the conference over to your Speaker today, John Carroll, Vice President Investor Relations.
Thank you.
Thanks for joining us for it.
Second quarter 2020 earnings call with me on the call today.
Yeah.
And she did that about a third of Nelson.
President and Chief operating officer.
Our second quarter 2015 financial results press release is now available on the Investor.
Before we begin I would like to inform you that for us.
During the call will be forward looking statements that involve known and unknown risks and uncertainties that may cause actual results to differ materially from those expressed or implied.
Factors include those referenced in the Safe Harbor statement included in our earnings release and filings with the SEC. This conference call contains time sensitive information.
Only as of the live broadcast on August seven 2023.
Finally, any percentage changes because scott will be on a year over year basis, unless otherwise noted.
I will hand, the call over to our CEO , Todd Nelson and we can get started.
Thanks, John and welcome everyone and thanks for joining today's call. We're pleased with the progress the company is making in this challenging environment I don't want to highlight that this is the fourth consecutive quarter that we've successfully reduced or maintained our operating expenses while growing revenue.
Year over year basis and.
As you'll see in this quarter's results, we continue making progress with our strategic collaborations grew both our revenue and installed base delivered new biopsy kits to the market secured additional financing and strengthened the board of directors through the addition of Paul Meister, former chairman of Thermo Fisher.
I'm also pleased to announce that during the second quarter, we achieved another technical milestone in a research collaboration with Pfizer something that further validates our enzymatic DNA synthesis platform. We remain encouraged by the progress we have made and look forward to continuing to validate this platform with our partner.
Solar remains a disruptive technology that will drive production of integrated workflows to the best shop, and we will continue to accelerate discovery timelines for our customers the ability to deliver on demand gene synthesis mrna eventually protein products with unprecedented speed and accuracy.
Further adoption of our newly launched products remains encouraging moving forward, we intend to increasingly focus our efforts on maximizing the commercial impact of our differentiated workflow solutions based on our mrna cell free DNA scalar and long Bill <unk>.
<unk> P DNI kits.
We have a highly compelling offering at the bench top for these solutions, which will catalyze further adoption of our products into our targeted workflows for antibody discovery pathway engineering precision medicine, an mrna vaccine discovery.
Now moving onto our second quarter financial results.
Our detailed financial results for the second quarter included in today's press release during the quarter. Our total revenue grew at 53%. Despite continued macroeconomic headwinds that impacted our product revenue results. While we saw solid revenue growth at 36% in our instrument business and our overall product revenue increased year over year by 14% our biopsy.
Kit revenue was down 16% during the quarter against a very tough comp in 2022.
We now for the first half of 2023, the biopsy kit growth.
Later than 10% and we anticipate that this rate will accelerate in the end of the year with new product launches.
Revenue for the first half of 2023 with $15 million, an increase of 33% from the $11 3 million in the prior period.
Gross margins came in at 65, 8% for the second quarter and compared to 48% for the same period in the prior year and were 61, 5% for the first half of 2023 as compared to 48, 6% in the prior period of 2022.
Strong contributors to this continued expansion include collaboration milestones, but also reflect positive mix shift in revenue from recently launched products within our growing biopsy portfolio and our efforts to vertically integrate reagent and instrument manufacturing.
Operating expenses for the quarter of $13 7 million for the second quarter 2023 were down 20% as compared to $17 2 million for the same period in the prior year.
Just to be curious primarily as a result of ongoing cost cutting efforts, including a reduction in force during the current quarter that was intended to focus the team are most profitable and near term revenue opportunities and operating expenses for the first half, we're down 14% to $28 1 million compared to $32 8 million for the same.
Period in 2022.
Total net loss of $8 3 million reflects a decrease of 44% compared to $14 8 million in the same period in the prior year and net loss per share was 28.
For the second quarter of 2023 compared to <unk> 50.
For the corresponding prior year period.
Corresponding net loss for the first half of 2023 was $19 4 million compared to a net loss of 28 million for the same period in 2022, representing a 30% decrease.
Cash cash equivalents restricted cash and short term investments were $47 5 million as of June 32023.
And with that I'll move on to provide a brief update on our product development and commercial status.
During Q2, we accomplished several important product development initiatives, including the on time launch of three new biography kids, bringing our total offering to 12 kits across both the $32 50 and 9600 systems.
Of note, we completed the first commercial shipment of our buyouts T select DNA cloning kit, which enables an on demand and automated bench top assembly of DNA fragments.
Our own proprietary Gibson Assembly method or Golden Gate Assembly, beginning from the customer's existing linear DNA. This product launch broadens our appeal to customers that have used golden gate cloning methods and their workflows and by doing so telesis by our customers are now able to perform automated cloning at the bench top for the two most commonly used clothing methodologies.
And these kids are now available on both the $32 50 and 9600 systems.
Second we launched our proprietary <unk> library prep kit for plasma and sequencing, which enables on demand and automated library preparation of plasmid DNA for use in next Gen sequencing applications. This kit represents a major milestone in the evolution of the biopsy system now provides customers with a more complete solution across many synthetic by.
<unk> and genomics workflows.
And third we introduced demand fragment kits on the 9600 system with this launch customers are now able to build 96.
<unk> James at up to seven five Kb and a single fully automated overnight run this as a key advancement in DNA synthesis automation for longer genes and we're pleased with the initial product launch numbers, which are being driven by adoption.
Customers.
For rapid mrna template synthesis and precision medicine in vaccine discovery.
The team here at <unk> remains focused on delivering an expanded range of differentiated products that enable researchers to optimize and accelerate discovery through push-button automation of complex molecular biology at the bench top we've.
We remain in the early stages of adoption in our targeted workflows and expect growth to accelerate as we move deeper into these workflows, where we have disruptive technology and differentiated products that will serve to increase the value proposition of the <unk> platform.
Moving on to gross margin, which continues to expand gross margins continued to expand as a result of mix shift to higher margin products like the 9600 system.
<unk> long fragment builds and a suite of select kits for the bio XP.
We briefly mentioned a few minutes ago that we anticipate gross margins will continue to improve as we complete the vertical integration of algar manufacturing with Clement to substantially offset our existing external supply by the end of 2023.
When combined with our initiative to likewise, a vertically integrate the manufacturing activities related to the biopsy instruments should accrete to gross margin with full year effect of these three initiatives taking place in 2024.
And finally, a brief comment on the status of our base cost structure.
As mentioned earlier in the call. We are pleased with the progress the company is making in this challenging environment and I want to highlight again that this is the fourth consecutive quarter, we have successfully reduced or maintain operating expenses, while growing revenue on a year over year basis as such we continue to remain confident in our path to profitability estimated to be the end of 2024 remains on track.
In closing I want to share that our team is very experienced operationally strong strategically and we remained focused on achieving near term commercial goals, furthering new and existing partnerships controlling costs launching new products and improving profit margins and with that I'll ask the operator to open the call for questions. Thank you.
Thank you we will now conduct the question and answer session. As a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, please standby, while we compile the roster.
And our first question comes from Brandon Couillard from Jefferies.
Hey, guys good afternoon Todd.
Let me just big picture.
Obviously, the capital equipment demand backdrop has gotten tougher and based on what we've heard from almost every other tools company in the quarter have you seen a change in demand backdrop and to your point of view.
<unk> sales cycle is longer capital approval times are shifting budgets.
Secondarily could you just recap what instrument growth yet on a year over year basis.
Yeah, Hi, Brian and thanks for the question so instruments for biopsy platform instrument growth was up 36%. We sold 17 instruments. The mix. It was about 15 $32 50 is 9600. So you can see from that mix that the 9600, which is also the more expensive of our two systems.
Uh huh.
It is a little bit less than what we had anticipated we have made up for that with more than 30 to 50 system. So overall I feel good about that but the mixed as reflect.
Standard sales cycles more.
More signatures to get things through extended amount of time for the sales team to get things from a lead opportunity through.
Customer so the sales cycles are extended we've seen some capex pressure on the 9600.
And we pivoted.
In a sense when we go to the customer to make that up with $32 50, So were happy with the 17 overall, but.
I think we will we will begin to see an uptick in the 9600 is this.
Macroeconomic.
Condition at some point result.
Yes.
Can you quantify the Pfizer.
Milestone you booked in <unk> and remind us other two more that you anticipate in the back half and how big are those.
Yeah. So we signed that agreement in 2021, we've successfully achieved two of the four milestones.
The cadence is generally your brand and that you know it takes about a quarter to achieve the milestone and so we just achieved in one in Q2. So Q3 will be working to achieve the next milestone. So I'd anticipate one more milestone in 2023, and then Theres one more milestone in 2024, and you could anticipate that happening at the same cadence.
In 2024.
What was that about $2 5 million, if I remember correctly.
Yes, I think they're roughly that that's publicly available. So I think I'd say, it's a 10.
$10 million and technology milestones that are divided up.
Between.
Four different milestones and that I would just remind you also that.
Pfizer.
Following the conclusion of the research period has some amount of time to reflect.
To move forward at which point should they choose to do that would trigger the cascade of additional clinical development and commercial milestones.
Got it.
And then I guess.
Sure.
Willing and able to update your full year outlook in terms of revenue.
Installations.
Secondarily.
Where do you expect capex to trend.
In the second half exiting the year given some of the mortgage at hospitals.
Sorry, Brian just a clarification, you mean capex spending on our end or.
Are you speaking to what we released as far as.
Revenue expectations and things like that.
Yes, just curious if youre willing to update revenue expectations for the year and then secondarily the opex operating expenses in the second half.
Cost cuts, yes, no update from what we did at the end of May when we completed the financing. So we're targeting from an opex perspective, including noncash and onetime charges.
For things to be around that $55 million, Mark if not better.
Gross margins to be in the 57% region and revenue to be in the $35 million region.
Got it okay.
Just one more for me and I'll hop back in the queue, Paul Meister, obviously acquisitions moving forward.
<unk> shot you see waste for him to add value either operationally or strategically what do you think he brings.
To the table.
I mean, Atlanta, because so much of our experience in EMEA I'm glad to have him on board I think getting the former chairman of Thermo Fisher on Board is a real Testament to.
The company here.
And his manage.
Investment in the company.
Alongside of Us.
Others, including myself I think shows great fortitude and interest in the potential.
Outcome I would say operationally Super Fair question, Paul is a very very engaged very smart business leader, who is Scott direct experience in running.
It seems like this year is 35 40 years. So I think that he has been a tremendously good add to the board of directors.
And I expect to be able to learn some great. Thanks very much so.
I think it's all good stuff.
Hey, guys. Thank you. Thanks.
Thanks, Brian .
Our next question comes from Paul Knight from Keybanc.
Okay.
Hey, Todd Thanks.
Thanks for the time.
Eaton acquisition, obviously sets you up to do more internal oligo production and you're talking about.
Gross margins I think what in full effect in 2024.
What type and level of gross margin would you really think about with.
You bet.
Yes.
Integration I guess is the right word for it.
Yes, so I'll take a high level crack at that and then hand, it over to Eric <unk> to answer so you're right. We have now implemented.
Proprietary small scale synthesis all ago production facility.
<unk> previously that our intent is to offset.
The vast majority of our external audit supply by the end of the year and we're on track to do that so our target is 80% to 100% of that.
And again on track to do that the impact of that initiative when combined with our other two initiatives on our three point plan to improve gross margins should be about and I think we've disclosed previously about it.
1000 basis points or 10 percentage points.
Total the full effect in 2024.
Yes, that's right Todd.
From.
Base level.
From the base level, I mean I guess.
I can follow up.
The incremental impact.
The.
Vertical integration of reagent manufacturing apart from the other two initiatives right now I'm happy to have a follow up call on that but I think it's fair to say that.
From a product margin perspective, we would expect to see that much accretion.
On a year over year basis.
Okay.
And then.
The.
Could you refresh us on how the Pfizer collaboration rolls out.
The quarterly cadence on that.
Sure happy to so again, we signed that agreement in the fourth quarter of 2021, there is a two year research period.
There was an eight 8 million upfront fee the cadence of the four milestones is basically anticipated.
When we achieve them we've achieved the second of four.
And the cadence should be another one in 2023, presumably toward the end of the year because we just achieved one and then the final or fourth milestone.
In the first half of 2024, so two more to go and that ends the research period at which point.
Pfizer our collaborator can elect to move forward with the program at which point that would trigger the additional.
Clinical development and commercial milestones.
Okay and then.
Lastly, could you talk rigor.
Regarding that collaboration.
Sure.
How how.
Those milestones.
You're pretty comfortable with the trend I guess, the best way to ask it.
Sorry, Paul can you just repeat the question.
I don't know how the what triggers the milestones in.
They are.
The engineering specs.
It seems like it was more engineering specs in the past those obviously getting Matt.
How challenging do you think those milestones are it seems like you've been kind of clicking away really well.
Any thoughts on it.
Change is still running pretty smoothly is my impression.
Yes, we're very happy with the relationship with Pfizer I think it's going exceptionally well we've achieved happened the milestones we're working hard on the other half.
And I believe the technology is viewed by them as our CEO has said publicly is as.
One of the four major strategic pillars that theyre going to build their mrna franchise around and so we're proud to work.
With them to be their DNA template provider in that process. So I do think things are going well, but we.
We have no idea, what they'll end up doing but I think from our perspective, we're working hard to achieve the goals and we've been doing that and we anticipate we'll continue to do so.
Okay. Thanks.
Yes.
Our next question comes from Stephen Moss from TD Cohen.
Great. Thanks for the question.
A lot of ground covered so I just have a couple of follow ups.
On the gross margin Todd I think you said it was a $10 million or sorry, 10% gross margin impact in total in 2024.
Could you give us some color on maybe separating the impact from from Eaton Oligos and then also bringing you're bringing in the in house by <unk> manufacturing.
Hi, Steve Thanks for the question. So I think the margin as we said on product margin, which we havent really disclosed I think that analysts can back into that unimplanted margin it'll.
It'll be around 6% and on our products it'll be about 10% and so that accretion will result from executing against our three point plan that three point plan again is to <unk>.
Continue to focus more intensely on areas for the biopsy, where we have a very competitive and highly differentiated offering better pricing better margins Thats point number one point number two is the vertical integration of reagent manufacturing, which is directly impacted by the Alagoas synthesis program that you mentioned.
And then point number three is the in sourcing.
Our instrument manufacturing so those three things together, we believe will accrete between 601000 basis points on a full year basis in 2024 to be ending gross margin in 2023.
Okay I appreciate the color.
And then you.
Turning over to the select kits.
Do you have like a pipeline.
Other catch Youre going to rollout can you give us a sense for what might be next.
Yes, happy to and just to remind you. We've got 12 kits now launched on the $32 50, and 9600 systems.
Total of 21 kits, there's 12 on the $32 50.
And I guess that means nine on the 9600 I'll hand, it over to Eric to run through the rest of the year's product development plan.
So that you can have the answer yet.
Yeah, Thanks, Todd Hi, Stephen So we do have some additional kits that we will be launching we're launching three more kits in this quarter and two kits in Q4, so that will round out all of the additional product development that we're going to do for the year.
Those are really spread across the select line that de Novo line and an expansion of the Mcs Library Prep line that we've now launched this quarter and I think our efforts there Steve are too.
When we get to the customer to be in parity from a workflow perspective.
<unk> hundred 90, <unk> et cetera, so what youll see by the end of 2023 is that both the $32 $5 9600 will essentially be running the same chips that's right.
So when system's not disadvantaged are advantaged and FHA, our workflow and that means to us the adoption will likely be based upon needs related to throughput.
Okay. That's helpful and then last one for me.
Are you guys, providing any updates on sola commercial launch timing.
So we still intend to launch some form of solar in the fourth quarter of this year.
Their agent platform and so that remains as of today on track.
And we've been pleased with the development, we will be launching that rating platform into the Christopher market.
And so we're excited about that and that work continues also.
Gene synthesis area with Pfizer because you are now.
Okay. That's it for me I appreciate that I appreciate the questions.
My question. Thank you.
Okay.
And our final question comes from Brian <unk> from Jefferies.
Hey, Thanks, Sir.
Todd.
In terms of.
Kit utilization I think you said.
Revenues were down 16% year over year did they grow sequentially in platelets behind.
That trend.
Sure.
Yes, thanks for the question Brandon So.
The interesting thing is ironically, we've seen good are you in this market good sequential growth. So we saw about 10% sequential growth Q2 over Q1 in 2023, so it's not as if though we're seeing a sequential downtick.
When we look at Q2 performance on revenue basis compared to Q2 in 2022, it was a very tough comp.
Sales in Q2 of 2022 two's in there sorry nearly.
Nearly doubled so sales were up about 100% due to some very large one time orders in <unk>.
Q2 of last year, so that has the negative impact.
Essentially this quarter being a very very tough comp, but we are seeing sequential growth quarter on quarter, which I view as a good thing in this market. So we do see sequential growth, it's 10% or better.
And that will only get better mathematically if we get into the second part of the year because the comps won't be as tough. So we are seeing sequential growth. There was a tough comp last year. When sales grew at about a 100% for the kits. They were up 62% in the first quarter of this year.
On a year over year basis.
And down 16% against the tough comp this quarter.
Okay, that's very helpful much less different message.
Okay. Thank you.
Thanks for asking.
This concludes today's conference call. Thank you for participating you may now disconnect.
Okay.
Thank you.
Okay.
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